Sun TV business is in good shape

BL Research Bureau Chennai | Updated on March 12, 2018

Stock trades at a steep discount to its peer

The Sun TV Network's stock valuations have been sent spiralling down on Thursday. With the erosion of over a fourth of its market-capitalisation, the share trades at just 14 times its FY11 earnings, at a steep discount to peer Zee Entertainment's 22 times.

It is news flow rather than core business developments that have held sway over the stock in recent times. After touching Rs 550 levels in January this year, the stock has been on a steady decline, coinciding with the deepening investigations into the 2G spectrum allocation scam. Electoral reverses for the DMK in the Tamil Nadu Assembly elections and later the hauling up of Kalaignar TV officials, both undermined the stock, though Sun TV has vigorously denied any association with Kalaignar TV.

When reports of Mr Dayanidhi Maran being probed in connection with allegedly favouring a telecom company with licenses as a quid pro quo for investments in Sun group surfaced, it was a freefall for the Sun TV stock.

Business strength

The stock market action apart, the company itself has seen a robust couple of years in FY10 and FY11. In the last fiscal, revenues increased by 38.6 per cent over 2009-10 to Rs 2,013.5 crore, while net profits expanded by 48.1 per cent to Rs 769.8 crore. The growth rates were similar even in 2009-10 when most other regional and national entertainment channels were still struggling to drive advertising revenues.

Sun TV's margins(35 per cent plus PAT) are way ahead of peers, thanks to its near monopoly in television viewership in Tamil and its ability to keep viewers glued to its channels in other southern languages as well. With distribution network too being controlled through ownership of cable networks such as SCV and DTH company Sun Direct, the company enjoys an end-to-end grip over its business.

In Tamil, going by TRP ratings from agencies such as TAM, all the top five programmes are from the Sun TV stables. It has an estimated 70 per cent plus viewership in Tamil television and occupies top 2-3 positions in most regional languages where it operates. This heightened viewership, especially prime-time shows, allows the company to take periodic and stiff advertisement rate hikes. In April this year, the company took another round of ad rate hikes across its channels, to the tune of 8-32 per cent, which is again much higher than industry standards.

Published on June 02, 2011

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